Hi Jo-Anne

Yes, it is possible to run two different businesses in both programmes.  We ran two in MYOB and now run four in Quickbooks.

Cheers,  Paul

Hi Shelley

Greg brings up an interesting point about Stamp Duty.  Unlike NSW, in Victoria Stamp Duty is not payable until the sale is completed, i.e. in the case of an Instalment Contract, the term of the loan or whenever the loan is paid out.  Also, in Victoria, the state government pay the FHOG on exchange on contracts.

The ATO has a ruling about Instalment Contracts of the type we're talking about.  Their ruling, ATO ID 2004/407, indicates that CGT is only payable on an emerging profits basis.

Cheers,  Paul

Hi

As Richard says, it is achievable.

Whenever we are buying we know people are negotiable in two areas, i.e. the price or the terms.  We've also learnt that we don't normally get agreement from the vendor in both areas, i.e. if you get them to move on the price, you don't normally get any movement on terms.

In the case of buying with deposit finance, you're asking for them to be negotiable as to when they'll receive all their money.  We find we normally have to offer the asking price, to get this across the line.

Cheers,  Paul

Hi Ch4rlie

Welcome to the forum and I hope you enjoy your time here.

It's great to hear that you've been researching and come across negative gearing.  It's a great tool but, like most tools, can be dangerous when not used correctly.  We've helped out numerous people who've gone too far with negative gearing and due to changes in their life, have not been able to service the negative gearing monthly shortfall.

We use both negative gearing and positive cash flow strategies.  We use the positive cash flow properties to support our long term buy and holds (usually negatively geared).

Cheers,  Paul

Hi Michael

We use a discreationery trust with a corporate trustee as one of our business structures.  You mentioned the idea of a campany as tustee and I've got to agree with you.

We ensure that the corporate trustee (i.e. company trustee) is a $2 company with a single director and we ensure the company's only reson for existance is to be trustee for this particular trust, i.e. for best asset protection we don't let it "do" anything else.

Also we try to make sure that the the director of this corporate trustee has minimal assets in his/her name.

Cheers,  Paul

Hi WorkingOnIt

The definition of Vendor Finance in our booklet is, "Vendor Finance (also know as Seller Finance) is finance offered by a seller (a Vendor) to finance the sale of real estate to a buyer".

What we do, in a nutshell, is buy a house and then sell it to a buyer who can't get a traditional home loan.  This is done by making vendor finance available to this buyer.

A few web resources that may help in your search for information about vendor finance in residential real estate are:
https://www.propertyinvesting.com/strategies/wraps
https://www.propertyinvesting.com/strategies/lease-options
http://www.jvpropertypartners.com.au/index.php?option=com_content&view=article&id=50&Itemid=75
http://www.vendorfinancelawyer.com.au/
http://www.vendorfinance.asn.au/   The Vendor Finance Association of Australia
http://www.vendorfinanceinstitute.com.au

Cheers,  Paul

Hi sirrobin

I forgot to mention Gatherum-Goss & Associates.  Dale Gatherum-Goss wrote a great book called Trust Magic.  They're definitely on the ball regarding asset protection.

Their at  http://www.gatherumgoss.com/about-gatherum-goss/contact-gatherum-goss/

Cheers,  Paul

Hi Aman

Some of our JV Partners buy their properties with one owning 99% and the other owning 1%.  It's a simple process.  Just tell your solicitor that you want to purchase as tenants in common and the percentages you want and she/he will be draw up the paperwork accordingly.

Taking on 80% of the ownership now seems eminently sensible, due to the ability of the partner with the larger taxable income to get the benefit of the negative gearing on the property.  However all our buy and holds are long term positions and we look further into the future, i.e. we expect the property to become cash flow positive at some point in the future.  Of course, this would put us into a situation where the major income earner is now getting extra income.  Not good for us.

And if we wanted to sell the property in the future, 80% of the Capital Gain (after all the usual deductions) would be added to the income of the high income earner.  Once again, not what we want.

Cheers,  Paul

Hi Imam

In relation to Terry's comment, "If they don't pay their loan ……"; we overcome this potential challenge by ensuring that all our buyers weekly instalments are collected by a specialist vendor finance management company.  This is the company that pays our under lying mortgage.

I'm no lawyer but when an real estate Contract of Sale is exchanged, the purchaser gains equitable title (an Instalment Contract is a Contract of Sale with added clauses).  If the under lying mortgage has been paid and the Contract has been exchanged, I have yet to hear of a bank being able to repossess the mortgage.  In fact just recently a trustee in bankruptcy was unable to get a property that was sold with an Instalment Contract.

If you need more information about mitigating Terry's legitimate concerns, may I suggest you give the most experienced Australian vendor finance lawyer a call.  He is Tony Cordato and can be contacted at 02 8290 5600.  Tony in NSW and another lawyer, Lewis O'Brien in Vic, have been a great help to the Vendor Finance Association of Australia.

As a potential buyer you should ensure that your instalments are collected by a specialist vendor finance management company and that this company is a Holder or Representative of an Australian Credit Licence (or registant thereof).  You should also insist that you get independent legal advice before completing the legal paperwork and that this legal advice comes from a lawyer with extensive vendor finance experience.

Cheers,  Paul

Hi Imam

As you can see from the first two links I listed above, the two main Vendor Finance (VF) strategies are Instalment Contracts and Lease/Options.  While we've done many Lease/Options, we feel our clients receive greater security when buying with an Instalment Contract (the government regards it as a real sale as they pay the FHOG to our eligible Instalment Contract buyers).

I'll therefore answer your questions as they relate to Instalment Contracts.

Could i sell the property any time to pay the vendor finance off?  Yes you can sell the property at any time, as long as you can pay out the balance of your VF loan at the time of the sale.

Is Interest rates charge in VF is higher than the going rates?  As traditional lenders have varying interest rates, so do Vendor Financiers.  As a wild guess, they'd probably average out to about 1.5% above traditional home loan rates.  However this increased interest rate is usually only used by Vendor Financiers who want to encourage their clients to move to a traditional loan somewhere in the first 5 years of their loan.  Some Vendor Financiers want their loan to run over the long term and will pretty much mirror traditional lenders interest rates for the term of the Instalment Contract.

Loan terms.  Anywhere from 5 years (with a balloon payment at the end of the 5 year term) to 30 years.  All our Instalment Contracts are 30 years.

Property rights,would I be able to refinance the property in order to use equity etc & pay the vendor off.  As the Vendor Financier often has their own mortgage on the property, this refinancing you mentioned normally isn't available.  Before you pay out the VF loan you have "equitable title" on the property.  After you pay out the VF loan the actual title transfers to you.

Cheers,  Paul